Mr Stevens said critics were right to worry about instantaneous trading systems amid concern they may be adding to stockmarket instability and enabling predatory trading.

Asked about it on Friday at a parliamentary hearing by Labor MP Andrew Leigh, Mr Stevens alluded to the growing arms race among investment banks engaged in the use of ever-more sophisticated computer technology and complex trading algorithms.

“If you go to the stock exchange data centre, you will see that all the brokers have their computers in the ASX’s computer room because it is not good enough to have your execution technology up the road and have instructions go at the speed of light down a cable," Mr Stevens said.

“It has to be in the same room in order to keep up with the next guy."

He said even the cables in the stock exchange computer room were all of the same length to avoid even a nanosecond advantage. An ASX spokesman confirmed fibre cables connecting to the trading platform were all 62 metres long, with a similar length for links to the futures exchange.

“At some level one has to start wondering whether the social return from the amount of real resources that gets put into that capability starts to drop off compared to the amount of resources going in," Mr Stevens told the hearing. “I will get into terrible trouble for saying that, I am sure, with the financial community, but that is a question that people ask.

“I think it is a legitimate issue."

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The remarks come amid renewed calls last month from the superannuation industry for a tax on high-speed computer trading, which accounts for between 15 per cent and 25 per cent of all share trading on the ASX.

Financial services firms are split on the issue as Canberra reviews who will bear the $43 million the corporate regulator says will cost to police the stockmarket to 2016. Brokers have raised concerns HFT may impinge on the sharemarket’s integrity.

Dr Leigh said it was important regulators understood the risks involved as entrepreneurs often outpaced governments. “I certainly am concerned about some of the US reports that high frequency trading is coming out of the pockets of regular investors and could be adding volatility rather than stability to the market."

Mr Stevens said HFT could result in liquidity vanishing at precisely the moment it is needed. “There is a risk that, when you most need that liquidity, it will suddenly disappear, and you get fat-finger errors and so on . . . that can be destabilising," he said.

“I would agree with the general idea that in sudden moments of very strange things happening, there needs to be a capacity for some sort of manual override."